Correlation Between Golden Ocean and FLEX LNG
Can any of the company-specific risk be diversified away by investing in both Golden Ocean and FLEX LNG at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Golden Ocean and FLEX LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golden Ocean Group and FLEX LNG, you can compare the effects of market volatilities on Golden Ocean and FLEX LNG and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Golden Ocean with a short position of FLEX LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Ocean and FLEX LNG.
Diversification Opportunities for Golden Ocean and FLEX LNG
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Golden and FLEX is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group and FLEX LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLEX LNG and Golden Ocean is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Golden Ocean Group are associated (or correlated) with FLEX LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLEX LNG has no effect on the direction of Golden Ocean i.e., Golden Ocean and FLEX LNG go up and down completely randomly.
Pair Corralation between Golden Ocean and FLEX LNG
Assuming the 90 days trading horizon Golden Ocean Group is expected to generate 1.54 times more return on investment than FLEX LNG. However, Golden Ocean is 1.54 times more volatile than FLEX LNG. It trades about 0.06 of its potential returns per unit of risk. FLEX LNG is currently generating about -0.03 per unit of risk. If you would invest 7,592 in Golden Ocean Group on August 31, 2024 and sell it today you would earn a total of 3,498 from holding Golden Ocean Group or generate 46.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golden Ocean Group vs. FLEX LNG
Performance |
| Timeline |
| Golden Ocean Group |
| FLEX LNG |
Golden Ocean and FLEX LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golden Ocean and FLEX LNG
The main advantage of trading using opposite Golden Ocean and FLEX LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Ocean position performs unexpectedly, FLEX LNG can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FLEX LNG will offset losses from the drop in FLEX LNG's long position.| Golden Ocean vs. Aker Horizons AS | Golden Ocean vs. REC Silicon ASA | Golden Ocean vs. Kongsberg Automotive Holding | Golden Ocean vs. Aker Carbon Capture |
| FLEX LNG vs. DnB ASA | FLEX LNG vs. Mowi ASA | FLEX LNG vs. Yara International ASA | FLEX LNG vs. Telenor ASA |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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